A Score that Really Matters: The Credit Score
Before lenders decide to give you a loan, they need to know if you're willing and able to repay that loan. To figure out your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more about FICO here.
Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to consider only that which was relevant to a borrower's likelihood to pay back the lender.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih positive and negative items in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.
Your credit report should contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is enough information in your report to assign an accurate score. Should you not meet the criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.
AmeriBest Mortgage can answer questions about credit reports and many others. Call us at (321) 777-7277.